When the government uses taxes and spending to affect national economy, it is engaging in:

When the government uses taxes and spending to affect national economy, it is engaging in:
 a. fiscal policy.
  b. monetary policy.
  c. interest rate policy.
  d. trade policy.
  e. exchange rate policy.

Question 2

According to the substitution effect, an increase in the price of oranges will:
 a. cause consumers to consume fewer apples because more money is spent on oranges.
 b. cause consumers to spend more on oranges because a higher price signals that oranges are better than apples.
  c. cause consumers to replace some oranges with other fruit that is now relatively cheaper than oranges.
 d. leave consumers with less money to spend on all goods.

Question 3

If, due to rising demand, the price of cotton rose 10 percent while the prices of other goods and services rose an average of 15 percent,
 a. the relative price of cotton has risen and one would expect the output of cotton to rise as a result.
  b. the relative price of cotton has risen and one would expect the output of cotton to fall as a result.
  c. the relative price of cotton has fallen and one would expect the output of cotton to rise as a result.
  d. the relative price of cotton has fallen and one would expect the output of cotton to fall as a result.

Question 4

The sum of the unemployment rate and the inflation rate is known as:
 a. the macroeconomic index.
  b. the mortality rate.
  c. the market index.
  d. the misery index.
  e. a coincident indicator.

Question 5

CNN announces that bad weather in Central America has greatly reduced the number of cocoa bean plants, and, as a result, it is expected that the price of chocolate will rise in the near future. As a result:
 a. the current market demand for chocolate will decrease.
 b. the current market demand for chocolate will increase.
 c. the current quantity demanded for chocolate will decrease.
 d. there is no change in the current market for chocolate, but there will be after the current crop of cocoa bean plants is processed into chocolate.

Question 6

If, due to rising demand, the price of cotton rose 15 percent while the prices of other goods and services rose an average of 10 percent,
 a. the relative price of cotton has risen and one would expect the output of cotton to rise as a result.
  b. the relative price of cotton has risen and one would expect the output of cotton to fall as a result.
  c. the relative price of cotton has fallen and one would expect the output of cotton to rise as a result.
  d. the relative price of cotton has fallen and one would expect the output of cotton to fall as a result.

Question 7

A major drawback of the Keynesian approach to macroeconomic equilibrium is the assumption that the supply of goods and services in the economy always adjusts to aggregate expenditures
 a. True
  b. False
  Indicate whether the statement is true or false

Question 8

When the price of automobile insurance increases sharply, the likely impact on the market for automobiles is:
 a. an increase in demand.
 b. an increase in quantity demanded.
  c. a decrease in demand.
 d. a decrease in quantity demanded.

Question 9

The SRAS would be vertical:
 a. if there was no profit effect.
 b. if there was no misperception effect.
 c. if there was no profit effect or misperception effect.
  d. under no conceivable set of circumstances.

Question 10

According to economists, the fixed-price model of macroeconomic equilibrium depicts the modern economy most closely because it assumes that aggregate supply is independent of price.
 a. True
  b. False
  Indicate whether the statement is true or false

Question 11

The price of automobiles has increased sharply lately. As a result, automobile dealers have noticed that:
 a. demand has increased.
 b. demand has decreased.
 c. quantity demanded has increased.
  d. quantity demanded has decreased.

Question 12

Neither positive nor negative supply shocks
 a. Change AD.
 b. Permanently change real output in an economy.
  c. Change the price level in the long run.
 d. Do any of the above

Question 13

A horizontal aggregate supply curve indicates that equilibrium real GDP is determined by aggregate supply.
 a. True
  b. False
  Indicate whether the statement is true or false

Question 14

Andy views beer and pizza as complements to one another. If the price of pizza decreases, economists would expect:
 a. Andy's demand for pizza to increase.
 b. Andy's demand for pizza to decrease.
 c. Andy's quantity of pizza demanded to decrease.
  d. Andy's demand for beer to increase.